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Founder of Chandler-based opioid company indicted on federal charges

opioid-620A federal grand jury has indicted the founder and chief shareholder of Chandler-based Insys on charges of overly aggressive — and illegal — marketing of its powerful opioid drug which has helped fuel the opioid epidemic.

The criminal case, filed Thursday by federal prosecutors in Massachusetts, claims billionaire John Kapoor, 74, and others at the company conspired to use bribes and kickbacks to get doctors to issue new prescriptions for Subsys, the company’s concentrated form of fentanyl spray, and to get them to increase both the dosage and volume of existing prescriptions.

“The bribes and kickbacks took different forms, including speaker fees and honoraria for marketing events, food and entertainment, administrative support, and fees paid to co-conspirator pharmacies,” the indictment reads.

Kapoor and six former executives and others are also accused of defrauding insurers by setting up a scheme to mislead them about why patients needed the drug. The result was insurers approving payment for purchases in cases where Subsys, which the Food and Drug Administration has approved for cancer patients with “breakthrough pain,” also being prescribed for patients with less serious conditions.

The charges include racketeering conspiracy and conspiracy to commit mail and wire fraud. Each charge provides for a sentence of up to 20 years in prison and a fine or $250,000 or twice the amount of each their financial gains.

John Kapoor

John Kapoor

According to the indictment, Kapoor and Michael Babich, who was president and CEO of the company, were dissatisfied with lackluster sales after the drug hit the market in 2012. The result, the legal papers said, was a speaker program where doctors urged others to prescribe the drug.

But what was really happening, according to the indictment, was a system of bribes and kickbacks to convince doctors “to issue more prescriptions for the fentanyl spray outside the usual course of their practice and to change the dosages and volumes prescribed.”

What also happens, the indictment says, is that if doctors who did not write “an appropriate number of prescriptions” found themselves with fewer speaker fees.

Another way the charges say sales were increased was by urging doctors to give initial doses of the drug at far higher levels than even what was recommended in the FDA-approved package insert.

William Weinreb, the acting U.S. Attorney for Massachusetts, noted the indictment comes in the midst of a nationwide epidemic of opioid misuse, abuse and overdoses. Just Thursday, President Trump declared a nationwide “public health emergency.”

“Today’s arrest and charges reflect our ongoing efforts to attack the opioid crisis from all angles,” Weinreb said. “We must hold the industry and its leadership accountable, just as we would the cartels or a street-level drug dealer.”

And Phillip Coyne, special agent in charge of the Office of Inspector General for the U.S. Department of Health and Human Services, said the indictment charges that the Insys executives “allegely fueled the opioid epidemic by paying doctors to needlessly prescribe an extremely dangerous and addictive form of Fentanyl.” And Coyne, in a prepared statement, said the indictment is designed not only to prosecute and punish the Insys executives but also to send a message to the drug industry.

“Corporate executive intent on illegally driving up profits need to be aware they are not squarely in the  sights of law enforcement,” he said.

Others named in the indictment include Alec Burlakoff who was the company’s vice president of sales, Richard Simon who was national director of sales, Michael Gurry who had been vice president of managed markets, and Sunrise Lee and Joseph Rowan who were regional sales directors.

Kapoor, Gurry and Babich are all listed in documents from the Department of Justice as Scottsdale residents.

The criminal charges closely parallel a civil lawsuit filed against the company in August by Attorney General Mark Brnovich.

That case, playing out in Maricopa County Superior Court, charges that Insys used unfair and deceptive marketing practices designed to increase company profits at the expense of patient safety. The lawsuit says Insys engaged in a nationwide scheme to deceive patients, doctors and insurers about the safety of Subsys.

“Insys lied to insurers, concealed key facts from doctors and patients, and paid doctors sham ‘speaker fees’ in exchange for writing prescriptions, all in order to increase the sales of Subsys, without regard for the health and safety of patients,” Brnovich charged. “Insys made hundreds of millions of dollars from its deceptive scheme, but also put countless patients in harm’s way, exposing them to unacceptable and unnecessary risks of addiction and death.”

Brnovich is using the state’s Consumer Fraud Act to ask a judge to block Insys and its employees from engaging in unfair, deceptive or misleading acts. That allows him to demand the Chandler-based company to both pay restitution to consumers who should never have been prescribed the drug and force the company to surrender all of its profits from what Brnovich says is the company’s illegal practices.

No date has been set for a hearing in that case. An aide to Brnovich said the federal criminal charges should not interfere with the Arizona case.

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